For about a week now, you can no longer pay for your taxi fare using Visa here in Singapore. The reason for this outcome is over a surcharge dispute between Visa and the country's biggest taxi firm, ComfortDelGro.
Issue in contention
When passengers choose to go cashless, taxi companies charge an administrative fee of 10% for credit and debit cards, or 30 cents for EZ-link transport cards or NETS. Visa thinks that taxi companies should absorb this surcharge rather than passing on the charge to paying customers. Understandably, taxi companies would prefer not to hurt their bottom line by paying credit card fees. Overall, these unattractive surcharges promote a cash-reliant society, and readers of this blog know all about the high costs of handling cash in the long term. Although Singapore has the infrastructure in place to really drive contactless and even NFC payments, the adoption rate is slow because smaller merchants still prefer to receive cash.
How does this impact the taxi business?
Since taxis are still accepting other modes of payment, from Mastercard, JCB, Diners, and even NFC, taxi companies such as ComfortDelGro have merely brushed off the issue. Cashless constitutes a minority portion of the ComfortDelGro's profits (approximately 6 per cent), so not having Visa acceptance would not be a big hit to the bottom line.
Why is the dispute happening now? And why target taxis?
Cab companies and other smaller retailers have been charging surcharges since the 1990s without much of a reaction from Visa, so why are they taking such a firm stance now? Chris Reed from Campaign Asia thinks that this statement is more of a "PR stunt" to prove that Visa really champions the customer's interest. However, it looks like Visa and taxi operators have been at this issue for the past three years, with Visa only issuing an ultimatum early this February to pull out. Since only 1 per cent of ComfortDelGro taxi rides are paid for using Visa, perhaps that's why the taxi industry was chosen to make a statement to all retailers who impose surcharges on customers.
As a consumer, I would prefer that card fees should be borne by the merchant rather than myself, however, I don't believe that this terminating Visa acceptance by taxis is the right approach.
Interesting to note, but Mastercard is taking a completely different approach to promote cashless. In Singapore, Mastercard is currently offering a coffee promotion and 10% rebate for taxi fares for commuters who pay with contactless. While it is only short-term and certainly hasn't received as much press as Visa's big statement, it has a more win-win outcome for both consumers and the taxi industry.
Do you agree with Visa's stance against taxi company's practice to charge consumers? Join the conversation on payments in the region at our next event, Total Payments Asia which is happening in Bangkok. Find out more about the event here.
Photo Source: Julian Boot via Flickr